Japan’s new e-invoice retention requirements are part of the country’s latest Electronic Record Retention Law (ERRL) reform.
Along with measures such as the Qualified Invoice System (QIS) and the possibility to issue and send invoices electronically via PEPPOL, Japan is implementing different indirect tax control measures, seeking to reduce tax evasion and promote digital transformation.
In line with these objectives, the amended ERRL will require taxable persons in Japan to follow several compliance rules when archiving documents originating from electronic transactions, such as e-invoices.
Scope of the mandatory electronic retention rules in Japan
The reform has abolished the hard-copy retention option for electronic transactions. Starting 1 January 2024, records of electronic transaction information must be archived electronically.
As per the definition of the ERRL, “electronic transactions” includes transaction information carried out via Electronic Data Interchange (EDI), transactions via the Internet, and transactions in which transaction information is exchanged by email, among others.
The scope of such transaction information may include order forms, contracts, invoices, receipts, and other similar documents related to the transaction sent and received electronically.
How to retain e-invoices in Japan
Taxpayers must retain any records of electronic transaction information, including e-invoices, in an electronic archive, as prescribed in the Ordinance for Enforcement of the ERRL.
When retaining e-invoices, the following are alternative ways to ensure compliance with the ERRL:
- The issuer can timestamp the e-invoice
- The recipient can timestamp the e-invoice within a certain time period after receiving it
- Trading parties can use a system for exchange and archiving which either prevents corrections and deletions or keeps track of such corrections and deletions
- Trading parties can maintain a guideline explaining how the data is kept, which only allows data correction and deletion in limited situations and enables tracking of data correction and deletion records, if any
Updated retention rules for scanned invoices
Updated rules are also in place for taxable persons who convert their paper invoices into a digitized document and keep the invoice exclusively in electronic format.
One of the following is required to ensure the authenticity and integrity of the scanned invoice:
- Applying a timestamp of a vendor certified by the authorities or
- Choosing a method that provides the same function as a timestamp and using an electronic archive that ensures no correction or deletion is carried out after the scanning.
Under new rules as of 1 January 2022, there has been an extension to the timestamping deadline to about two months.
What’s next for e-invoicing in Japan?
In addition to enforcement of the QIS and all changes described above, Japan introduced transitional measures for taxable persons to provide a grace period for necessary preparations. The tax authority will abolish transitional measures under the ERRL on 31 December 2023. Invoice issuers should check their compliance with the Japanese tax framework in the meantime.
Have questions about e-invoicing changes in Japan? Get in touch with our tax experts.